The term 'Unit of Heredity' is used to refer to a GENE, which is a four-letter sequence of DNA that codes for a specific protein. Genes are the basic unit of heredity and are responsible for passing on traits from one generation to the next. They are made up of DNA, which is a molecule that contains instructions for the development and functioning of living organisms. Genes are passed down from parents to their offspring, and they can be altered through mutation or other environmental factors.